Laramide Resources: Updating Valuation on Recent Westmoreland PEA Completion

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As announced late last week, Laramide Resources (LAM) released an updated NI43-101 compliant Preliminary Economic Assessment for the Westmoreland Uranium Project, located in northwest Queensland, Australia. The updated PEA replaces the previous study conducted on the Project in 2016. This latest study incorporates a decade of technical advancement, including updated engineering, mine planning, metallurgical process design, environmental planning, capital and operating cost estimates, and revised market assumptions.

Given the release of this latest PEA and more clarity on input costs and estimated production metrics, we accordingly update our valuation methodology for Westmoreland, going from a risked in-situ per lb multiple to an actual DCF derived risked NAV. We considered the previous 2016 PEA as historic. Note that full PEA has yet to be uploaded to SEDAR - the report will be uploaded within 45 days of the July 22 announcement.

PEA METRICS VS HCM ESTIMATES

Given the Project's 65M+ lbs MRE as released last year (48.1M lbs Indicated and 17.7M lbs in the Inferred category), the updated PEA demonstrates a robust 11-year LOM project averaging 4.9M lbs of U3O8 production per year given throughput based on 2.9Mt per year. As per production, the proposed processing route comprises milling followed by conventional agitated tank leaching with sulphuric acid and pyrolusite. Following filtration and washing of the leach residue, uranium is recovered from the leach liquor using Continuous Ion Exchange (CIX). The recovered uranium is then subjected to neutralisation, precipitation and refining stages to produce a saleable uranium oxide concentrate. Given LT pricing of $90 per lb and an estimated cash cost of $32.40 per lb, the PEA estimated a post-tax NPV7.5% of $741.1M and a post-tax IRR of 33%.

The comparisons to our own estimates are displayed above at both a LT U3O8 price of $90 per lb and and current LT price deck of $100 per lb. Suffice it to say, the differences to our estimates stem largely to much more conservative production estimates and cost estimates. On the production front, we factor lower recoveries of 88% vs 95% in the PEA, along with lower throughput averaging 2.7Mt per year vs 2.9Mt. in addition to other production details, our overall LOM production estimates falls to 43.1M lbs over LOM, compared to the PEA's estimate for 47.9M lbs. On the pricing side, among other items we incorporate higher initial capex ($506M vs $456M), higher sustaining capex ($129M vs $84M) and a higher cash cost ($$34.50 per lb vs $32.40 per lb). Factoring in our LT $100 per lb estimate and using a discount factor of 12% (vs 7.5%), our resultant post-tax NPV12% amounts to $302.5M and a post-tax IRR of 23%. Our production estimates for the Westmoreland Project are as follow:

We stress the high degree of sensitivity to any of the above inputs. We will likely refine our assumptions once the full PEA will be posted and accessible via SEDAR.

CONCLUSION & VALUATION

Ultimately, we maintain our positive view of the company and reinforce the PEA-stage Churchrock Uranium Project (located in New Mexico) as the single largest value driver of corporate worth. Though Westmoreland provides ample upside optionality on future development (as evidently confirmed by the updated PEA), until national and state political leaders in Australia make a concerted effort to advocate and advance for new domestic uranium production, high quality Australia assets such as Westmoreland will continue to trade at discounted metrics. Incorporating the new PEA for Westmoreland, our updated corporation valuation continues to be underpinned by our 0.70x NAV multiple for the tier-1 Churchrock Project in addition to the 0.40x NAV multiple allocated for Westmoreland.

Our sum of the parts valuation equates to a C$1.30 per share target (rounded) which translates to potential upside of +155% from the recent July 24 close on the TSX. We note that along with the broader mining market selloff, shares of Laramide have declined by -35% over the last three months. Laramide shares currently trade at 0.38x discount to NAV.